The nation faces a nasty dual deficit problem: a painful jobs deficit in the near term and an unsustainable budget deficit over the medium and long term. This month, the Senate will be debating an issue with significant implications for both — what to do about the Bush-era tax cuts scheduled to expire at the end of the year.

In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether. Ideally only the middle-class tax cuts would be continued for now. Getting a deal in Congress, though, may require keeping the high-income tax cuts, too. And that would still be worth it.

Why does this combination make sense? The answer is that over the medium term, the tax cuts are simply not affordable. Yet no one wants to make an already stagnating jobs market worse over the next year or two, which is exactly what would happen if the cuts expire as planned.

Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt. And since financial markets don’t seem at the moment to view the budget deficit as a problem — take a look at the remarkably low 10-year Treasury bond yield — there is little reason not to extend the tax cuts temporarily. […]

Senate Democrats and Republicans almost never come together anymore. This month, they should fight the dual deficits rather than each other. Let’s continue the tax cuts for two years but end them for good in 2013.

I have to take issue with Orszag simply based on the obvious facts. Orszag says, “Ideally only the middle-class tax cuts would be continued for now.” And then only moments later he proceeds to provide his reasoning for why we need to keep the tax cuts. He says, “Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt.”

But there’s an inconvenient truth that means, on Orszag’s very own reasoning, that we badly need to keep the tax cuts for the rich:

Well, perhaps everyone should these days. Consumer spending accounts for roughly two-thirds of U.S. gross domestic product, or the value of all goods and services produced in the nation. And spending by the rich now accounts for the largest share of consumer outlays in at least 20 years.

According to new research from Moody’s Analytics, the top 5% of Americans by income account for 37% of all consumer outlays. Outlays include consumer spending, interest payments on installment debt and transfer payments.

By contrast, the bottom 80% by income account for 39.5% of all consumer outlays.

So you’ll have to explain why Orszag would say that we have to have tax cuts because “higher taxes now would crimp consumer spending,” and then proceed to abandon his own reasoning by even suggesting that we shouldn’t keep the tax cuts for the rich along with everyone else. I submit it’s because Orszag – like everyone else Obama has appointed – is himself a liberal ideologue first, and an intelligent economist second. And whenever the first contradicts the second, so much the worse for the second.

That said, Peter Orszag is still now on the official record advocating that we keep the Bush tax cuts. All of them. Including for the rich. For at least the next two years. That, he says, in his capacity as Obama’s chief handpicked expert in dealing with the budget and budget deficits, is the best course.

Unfortunately, Orszag’s boss is something of a fool.

I’m reminded of a quote about another disastrous presidency in regards to the ruining of the economy:

[Franklin Delano] Roosevelt’s string of business failures did not surprise those who knew him well. One friend, Franklin Lane, Wilson’s secretary of interior, concluded, “Roosevelt knows nothing about finance, but he doesn’t know he doesn’t know.” Therefore, he [Roosevelt] tried one scheme after another, pursuing whims not research, always thinking the next idea would be a winner. Henry Wallace, who would become Roosevelt’s vice president, liked his boss in politics but not in business…. “I reached the conclusion,” Wallace said after watching Roosevelt in action, “… that I would under no circumstances, ever have any business dealings with him” [Burton Folsom, Jr., New Deal or Raw Deal?, p. 27].

WASHINGTON — President Obama on Wednesday will make clear that he opposes any compromise that would extend the Bush-era tax cuts for the wealthy beyond this year, officials said, adding a populist twist to an election-season economic package that is otherwise designed to entice support from big businesses and their Republican allies.

What’s Obama’s plan? Nothing but pure, simple demagoguery. Obama plans to dig in and refuse to budge, and then demonize his opposition for digging in and refusing to budge.

But he’s playing chicken with the US economy, and with a lot of Americans’ livelihoods and lives.

Peter Orszag is hardly the only Democrat who is opposed to Obama’s hard-core ideological refusal to compromise:

WASHINGTON — Democrats in Congress are poised to play a leading role this month in thwarting their party’s effort to raise income tax rates on the wealthy.

Tax cuts enacted in 2001 and 2003 expire at the end of this year. President Barack Obama and Democratic congressional leaders have been eager to extend the breaks for individuals who earn less than $200,000 annually and joint filers who make less than $250,000. Those who earn more would pay higher, pre-2001 rates starting next year.

However, a small but growing number of moderate Democrats are balking at boosting taxes on the rich. Many face electorates that recoil at the mention of any tax increase. Some represent areas that are loaded with wealthier taxpayers. Further, some incumbent senators who don’t face voters this fall are reluctant to increase taxes on anyone while the economy remains sluggish.

Without their support, the push to raise rates on the rich probably will fail.

“The economy is very weak right now. Raising taxes will lower consumer demand at a time when we want people putting more money into the economy,” said Sen. Evan Bayh, D-Ind., who isn’t seeking re-election.

[snip]

Rep. Gerald Connolly, D-Va., represents the northern Virginia suburbs of Washington, one of the nation’s wealthiest districts. Median family income there in 2008 was $117,892, well above the national average of $63,211. He said that repealing the top rates would have political consequences.

“Sometimes we forget how we became the majority. We did it by winning some affluent districts,” he said.

The bigger problem for Democrats looms in the Senate, where Majority Leader Reid’s immediate problem is getting the 60 votes needed to cut off debate on the measure. Democrats control 59 seats, and at least three of them — Bayh, Ben Nelson of Nebraska and Kent Conrad of North Dakota — have signaled that they won’t back a permanent repeal of the tax cuts for the wealthy.
They suggest a way out of a stalemate — temporarily extending all the expiring tax rates — but so far the leadership isn’t going along.

Sean Neary, a spokesman for Senate Budget Committee Chairman Conrad, said the senator backed such an extension “for now.”
“The general rule of thumb is that you do not raise taxes or cut spending during an economic downturn. That would be counterproductive,” Conrad said.

Nelson also offered what’s become the centrist Democratic mantra. He, too, said he’d back extending the tax breaks for the wealthy “for at least a period of time because raising taxes in a weak economy could impair recovery.”

That stand could be even more popular with Democratic candidates for the Senate who aren’t incumbents. The hottest races are in conservative states, such as Kentucky, where Republican Rand Paul and Democrat Jack Conway are battling for the seat now held by Republican Sen. Jim Bunning.

Of the expiring tax cuts for the wealthy, Conway spokeswoman Allison Haley said that he“believes we should extend them now, especially when so many Kentucky families and small businesses are struggling under this recession.”

In Missouri, Republican U.S. Rep. Roy Blunt and Democrat Robin Carnahan are in a tight race. Despite a welcoming embrace with Obama at a Kansas City fundraiser in July, Carnahan said last week that she wanted to extend the Bush tax cuts for everyone.

“Now is not the time to raise taxes,” she said.

In Indiana, U.S. Rep. Brad Ellsworth, D-Ind., who’s seeking to replace Bayh, told the Evansville Courier & Press this summer that all the Bush-era tax cuts should become permanent.

That position makes sense, said Brian Vargus, a professor of political science at Indiana University-Purdue University Indianapolis, because Indiana is “an overwhelmingly Republican state … and there is never support for taxes or public goods.”

The moderate Democrats, and the bipartisan vote, are siding with the Republicans. That is a fact.

But that doesn’t stop Barack Obama from demonizing Republicans. Because he’s a demagogue and an ideologue, and that’s just what he does.

I recently expressed the same point in another article, along with pointing out other critical facts that make that article worth reading. But the same rationale for keeping the taxes low on the middle class and the poor demands that we also keep the taxes low for the rich. And if we don’t cut taxes for the rich, then let’s tax the bejeezus out of everyone. Let’s start taxing the 47% of Americans who pay no federal income taxes whatsoever. Let’s tax them out of their homes and into the poorhouse, and then let’s tax them out of the poorhouse and onto the street. And then let’s impose a street tax.

Either that, or force Democrats to be consistent. For just once in their lives.

More and more Democrats are admitting that increasing taxes on the rich people who actually create jobs would be a foolhardy thing to do.

That pours a big giant can of water on the fire Democrats started in the whole blame-Bush-for-the-economic-meltdown thing. Bush’s tax cuts were the biggest straw man for Democrats. And now some of the most prominent Democrats are saying we need to keep those same tax cuts that Democrats were universally demonizing only months ago.

Worried about the fragile economy and their own upcoming elections, a growing number of Democrats are joining the rock-solid Republican opposition to President Barack Obama’s plans to let some of the Bush administration’s tax cuts expire.

Democratic leaders in Congress still back Obama, but the willingness to raise taxes is waning among the rank and file as the stagnant economy threatens the party’s majority in the House and Senate.

“In my view this is no time to do anything that could be jarring to a fragile recovery,” said Rep. Gerry Connolly of Virginia, a first-term Democrat. […]

“It’s going to be hard to resist a one-year extension for everybody, given the state of the economy,” said Clint Stretch, a tax expert at the consulting firm Deloitte Tax LLP. “That’s where I think the ball is moving.”

The tax cuts were enacted in 2001 and 2003 under President George W. Bush. They provided help for both rich and poor, reducing the lowest marginal rates as well as the top ones and several in between. They also provided a wide range of income tax breaks for education, families with children and married couples.

Taxes on capital gains and dividends were reduced, while the federal estate tax was gradually repealed, though only through this year. […]

Another freshman Democrat, Rep. Bobby Bright of Alabama, said he would like to see all the tax cuts extended for two or three years, if lawmakers cannot agree on a more permanent plan.

“Party leaders are not my directors or my boss,” Bright said. “My boss is my constituents, and I’ve heard from a vast majority of my constituents that they don’t believe in tax increases on anybody at this point in time.”

Bright is high on the re-election endangered list, one of roughly four dozen Democrats in districts won by Republican presidential nominee John McCain in 2008.

In the Senate, where Democrats need unity and at least one Republican vote to overcome filibusters, at least three Democrats and independent Joe Lieberman of Connecticut have said they want to extend all the tax cuts temporarily.

Several Democratic candidates for Senate have also come out in favor of extending them all, including Robin Carnahan in Missouri and Jack Conway in Kentucky.

“Jack Conway was in favor of the Bush tax cuts when they first passed (in 2001 and 2003), and he’s in favor of extending the Bush tax cuts now,” said spokeswoman Allison Haley.

An article in McClatchey Newspapers points out that if Democrats try to hike taxes on the rich, it will be Democrats who stood in the way:

WASHINGTON — Democrats in Congress are poised to play a leading role this month in thwarting their party’s effort to raise income tax rates on the wealthy.

Tax cuts enacted in 2001 and 2003 expire at the end of this year. President Barack Obama and Democratic congressional leaders have been eager to extend the breaks for individuals who earn less than $200,000 annually and joint filers who make less than $250,000. Those who earn more would pay higher, pre-2001 rates starting next year.

However, a small but growing number of moderate Democrats are balking at boosting taxes on the rich. Many face electorates that recoil at the mention of any tax increase. Some represent areas that are loaded with wealthier taxpayers. Further, some incumbent senators who don’t face voters this fall are reluctant to increase taxes on anyone while the economy remains sluggish.

Without their support, the push to raise rates on the rich probably will fail. […]

Many Democrats and Republicans are eager for a tax cut battle, seeing it as emblematic of each party’s economic principles.

“Now the administration is calling for a massive tax hike on small businesses in the middle of a recession,” said Senate Republican leader Mitch McConnell of Kentucky, who maintains that higher rates on the wealthy would hit small business hard, a point the Obama administration disputes.

“So it’s no surprise,” McConnell added, “that most Americans think the country is on the wrong track and that Democrat policies have failed to do anything to fix their top concern, the economy.”

Democratic leaders are convinced that voters won’t buy that argument. Not only will the public back higher taxes for the rich, but “we have an opportunity to generate $700 billion that could go to deficit reduction and badly needed programs,” said Rep. Raul Grijalva, D-Ariz., a co-chairman of the House Progressive Caucus.

The middle class-only extension is thought to have strong support in the House, where Democrats have a huge majority, but some Democrats are reluctant.
Rep. Gerald Connolly, D-Va., represents the northern Virginia suburbs of Washington, one of the nation’s wealthiest districts. Median family income there in 2008 was $117,892, well above the national average of $63,211. He said that repealing the top rates would have political consequences.

“Sometimes we forget how we became the majority. We did it by winning some affluent districts,” he said.

The bigger problem for Democrats looms in the Senate, where Majority Leader Reid’s immediate problem is getting the 60 votes needed to cut off debate on the measure. Democrats control 59 seats, and at least three of them — Bayh, Ben Nelson of Nebraska and Kent Conrad of North Dakota — have signaled that they won’t back a permanent repeal of the tax cuts for the wealthy.

They suggest a way out of a stalemate — temporarily extending all the expiring tax rates — but so far the leadership isn’t going along.

Sean Neary, a spokesman for Senate Budget Committee Chairman Conrad, said the senator backed such an extension “for now.”

“The general rule of thumb is that you do not raise taxes or cut spending during an economic downturn. That would be counterproductive,” Conrad said.

Nelson also offered what’s become the centrist Democratic mantra. He, too, said he’d back extending the tax breaks for the wealthy “for at least a period of time because raising taxes in a weak economy could impair recovery.”
That stand could be even more popular with Democratic candidates for the Senate who aren’t incumbents. The hottest races are in conservative states, such as Kentucky, where Republican Rand Paul and Democrat Jack Conway are battling for the seat now held by Republican Sen. Jim Bunning.

Of the expiring tax cuts for the wealthy, Conway spokeswoman Allison Haley said that he “believes we should extend them now, especially when so many Kentucky families and small businesses are struggling under this recession.”

In Missouri, Republican U.S. Rep. Roy Blunt and Democrat Robin Carnahan are in a tight race. Despite a welcoming embrace with Obama at a Kansas City fundraiser in July, Carnahan said last week that she wanted to extend the Bush tax cuts for everyone.

“Now is not the time to raise taxes,” she said.
In Indiana, U.S. Rep. Brad Ellsworth, D-Ind., who’s seeking to replace Bayh, told the Evansville Courier & Press this summer that all the Bush-era tax cuts should become permanent.

That position makes sense, said Brian Vargus, a professor of political science at Indiana University-Purdue University Indianapolis, because Indiana is “an overwhelmingly Republican state … and there is never support for taxes or public goods.”

So from this article we see the term “moderate.” And the moderates are those Democrats who see a compromise to the looming war over tax cuts: keep them all for now. Don’t hike taxes on the only economic class of Americans who have the wherewithal to actually create jobs. Keep the the tax cuts for at least a year, if not 2-3 years. But the hard-liner Democrats are willing to see the tax cuts end for EVERYONE in order to maintain their Marxist class warfare principle of punishing the rich for being successful.

Democrats offered two reasons in their unrelenting demagoguery of George Bush: 1) they said the tax cuts caused the economic disaster; and 2) they said Bush’s refusal to regulate caused the economic disaster.

But 1) is now blown apart, given DEMOCRATS’ current acknowledgment that the Bush tax cuts – yes, even for the rich – weren’t the bogey man Democrats have been saying.

And 2) suffers from the flaw that Bush DID try to regulate the entity most responsible for the meltdown that befell the economy in 2008, and the ONLY reason that entity was not reformed and regulated was because DEMOCRATS blocked Bush at every turn.

That entity was the Government Sponsored Enterprise, or GSE, commonly known by the brand names of Fannie Mae and Freddie Mac.

It was Fannie and Freddie that expanded and ultimately exploded using dangerous subprime loans (see also here). It was also Fannie Mae and Freddie Mac who bundled thousands of bad and good mortgages together into instruments called “mortgage backed securities” and sold them to the private sector. And when no one could separate the good from the bad, uncertainty paralyzed the banking system and led to the crash.

In 1999, under pressure from the Clinton administration, Fannie Mae, the nation’s largest home mortgage underwriter, relaxed credit requirements on the loans it would purchase from other banks and lenders, hoping that easing these restrictions would result in increased loan availability for minority and low-income buyers. Putting pressure on the GSE’s (Government Sponsored Enterprise) Fannie Mae and Freddie Mac, the Clinton administration looked to increase their sub-prime portfolios, including the Department of Housing and Urban Development expressing its interest in the GSE’s maintaining a 50% portion of their portfolios in loans to low and moderate-income borrowers.[10]

As noted, subprime mortgages sky-rocketed during the initial era of loosening of terms throughout the 1990’s. From a low of 5% of mortgages in 1994, to 14% in 1997, to 23% in 2005, subprime mortgages continued to boom in the early 2000’s. Following the 2004 initiative policy change spearheaded by a U.S. Securities and Exchange Commission (SEC) decision to allow the largest brokerage firms to borrow upwards of 30 times their capital, subprimes became an even greater investment vehicle for investment banks and institutions in the U.S. and around the world. Since 1994, the securitization rate of subprime loans has increased from approximately 32 percent to nearly 78 percent of total subprime originations.[11]This further exposed the financial community to the effects of the coming housing bubble.

Democrat policies created the housing bubble that Christina Romer acknowledges was the cause of the destruction of the US economy.

And the refusal of Democrats to reform and regulate Fannie and Freddie exploded that bubble.

The mainstream media propagandists refused to report the truth. They kept broadcasting a lie, and naive and frankly stupid Americans rewarded the Democrats who created the economic disaster with total power.

And we’ve been paying for that stupidity for the last two years.

As of today, Obama is at a dismal 42% approval, and in danger of plunging into the 30s. 45% of Americans now strongly disapprove of Obama, versus only 24% who still strongly approve of the job he’s doing “fundamentally transforming” our economy into a pre-industrial barter system.

Obama is in full meltdown mode as all of his campaign rhetoric is being revealed for the lies it always was: